John D’Ambrogio

This just in from Steve Baird, CEO of Baird and Warner, the nation’s 10th largest real estate firm (and growing). Dean Rouso and Prime Property Partners in La Grange have joined B&W, serving the communities of La Grange, La Grange Park, Western Springs, La Grange Highlands, Brookfield, Riverside, Westchester, Burr Ridge, Countryside, and Willow Springs.

Says Steve – “I am excited to announce that Baird & Warner has acquired west suburban real estate broker Prime Property Partners, headquartered in La Grange and owned by Dean Rouso.

Dean has led Prime Property Partners since its inception — and is a well-respected member of the real estate community both locally and nationally.”

Dean has served as a member of the Board of Directors for the National Association of Realtors; president of MRED; as well as president of Mainstreet Organization of REALTORS®.

Onward and upward….

John D’Ambrogio

A recovery?  More misery?  More opportunity? I’m sure everyone has their opinions.  Tara-Nicholle Nelson – author of “The Savvy Woman’s Homebuying Handbook” and “Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decision” recently posted her thoughts via Inman.com   Here are a few of her predictions:

1 – More foreclosures

I’m afraid Tara-Nicholle is spot on with this prediction.  All sources, Fannie and Freddie, and all the major banks are predicting a pretty significant increase.  In my opinion, there’s not much we can do about it except take our medicine.  The market will never adjust until it gets these homes “through the system.”  Look at AZ and FL – They took the hit, and seem to be the first to recover from this housing slump.  I’m afraid there’s no secret sauce for this one, folks.  The banks have a huge backlog, but they are ready for the task.

2. REOs and short sales will become the new normal.

Again, Tara-Nicholle knows what she’s saying, with one caveat.  They won’t “become” the new normal – they will continue to be the new normal.  While overseeing both a relocation and REO division, the last 18 months we’ve seen it become unavoidable.  I know it sounds trite to say, but “it is what it is.”  Even more importantly, REOs and even short sales are becoming “easier” to buy – less time delays as both banks and agents get better at shepherding them through the system. Another reason they cannot be disregarded as “comps.”

3.  So-called ‘smart cities’ will do well

According to Nelson’s interview with Jed Kolko, chief economist for  Trulia, he commented that ”smart cities will continue to have hot real estate markets next year. But Kolko defined smart cities much more broadly than the California tech hubs. Other tech centers like Austin, Texas, and the Massachusetts suburbs of Cambridge, Newton and Framingham all made Kolko’s list, as did Rochester, N.Y. (a town known for its highly educated, highly skilled work force).”

4. Consumers will get ‘hopeless’

Nelson says “I mean hopeless in the best of all possible ways.”  I think what she really means is “realistic.”  Which probably follows some sort of a twelve step program that includes “despair,” “denial,” etc.  Regardless, I think that her hope for “hopeless” is still a big optimistic.  I might push that prediction to 2013 myself….

Regardless, it’s a great article, you can read it all here.  And what are your thoughts, Chicago real estate professionals?

John D’Ambrogio

Today, as we celebrate the life of the Rev. Dr. Martin Luther King Jr., reflect on how another Chicagoan (did you know King lived on Chicago’s west side for a time?) worked to promote fair housing during those turbulent time.

2012 marks the 50th anniversary of the year John Baird appeared before the Chicago City Council to urge them to pass the open occupency law for housing. Mr. Baird is chairman of the board of Baird & Warner real estate. Mr. Baird will turn 97 this year.

Click here to listen to him reminisce:

John D’Ambrogio

Don’t worry, I don’t  expect you to read it all (but if you do.. click HERE ).  But it’s an interesting read – OK I didn’t read it all .  However, maybe I will, because it describes a possible conversion plan for REOs.  Conversion to what, you ask?  To rentals.

The Fed poses that REOs could be converted to rental on an “enterprise level.”  Currently investors simply buy what they can, where they can, and it’s difficult to efficiently buy in bulk and take advantages of certain economies of scale.

In addition, the reduced cut-rate prices that would actually attract super-bulk sales are usually too much for individual property owners to bear.  Finally, the banking regs and laws surrounding investment purchases of REOs is simply not pro-investor.

Now, remember that we’re assuming these properties are rent-able, i.e. inhabitable.  And the neighborhoods stable enough to attract renters.  Time is the enemy of the REO property.  The longer it’s on the market, the more it rides it down, and the more it runs the neighborhood and the comps down too.

The fed suggests that a “possibility is to auction to investors the rights to acquire, in a given neighborhood, a future stream of properties that meet certain standards instead of auctioning the rights to current REO holdings.”  Another option is the “possibility …to encourage deed-for-lease programs, which circumvent the REO process entirely by combining a deed-in-lieu of foreclosure – whereby the borrower returns the property to the lender – with a rent-back arrangement in which the borrower remains in the home and pays market rent to the lender.”

It’s all speculation and “white papering” at this point, but it appears the FED is taking a much closer look at this issue, and actually coming up with some compelling ideas!

John D’Ambrogio

Two Chicagoans made Inman’s top 100 most influential people, and the author is privileged to know both of them. Called the industry’s “brain trust, power brokers and deal makers” as well as non-industry members who impact the business, it’s quite a list.

A major qualifying criteria is whether or not the members of this august list have the power to CHANGE the real estate industry.

Pam O’Connor is CEO of Leading Real Estate Companies of the World, and it is truly the world’s largest real estate services network. Many consumer are not aware of the Leading RE “brand,” and with good reason.  Unlike franchises, Leading RE promotes the broker, not the affiliation. Believing they have the best independents in each marketplace, LRE members are often #1 or #2 in their respective markets. In the 25 years, Pam has managed var
ious networks that ultimately have become the Leading RE organization

Another prominent Chicago is Baird & Warner’s own Eric Bryn.  A Leading RE alum (he spent eight years there), Bryn launched such innovative LRE  tools as www.relohomesearch.com and the propopoly blogging platform (the author is a proud recipient of his first “blogger of the year” award back in the day).  At Baird, Eric is vp of digital innovation and a mastermind behind the company’s new website (a partnership with Active Websites), with a focus on easy, fast intuitive search.

And while not a Chicagoan, congrats to industry colleague Joe Horning of Shorewest, just north of the border, in the d

airy state. Joe “played a major role this year in overturning a National Association of Realtors policy relating to the ability of real estate franchisors to display locally sourced Internet Data Exchange real estate listings from around the country on their national websites.”

Also included if former Chicagoan Jamie Daimon, CEO of Chase.  I won’t get into how interrelated finance and real estate are these days!  Congratulations to all the recipients.

John D’Ambrogio

Two of Chicago real estate’s most well known names, Mary Umberger and Paul Boomsma, recently discussed upper end clientele and “bargains” in Ms. Umberger’s Chicago Tribune weekly column.

The article, entitled “Even the rich are jostling for bargains” tells is like it is for the so called one per centers. Boomsma, a 20+ year veteran of the industry is president of Leading RE’s Luxury Portfolio Fine Property Collection, a Chicago based real estate network of luxury brokers from around the world.

Following are exerts from Mary’s excellent Chicago Tribune  article, where  Boomsma discussed result’s  from his firm’s sponsorship of the “Survey of Affluence and Wealth in America,” produced by Harrison Group and American Express Publishing:

Q: Who do you study?

A: We’re really talking about the top 10 percent of the nation’s population. We look at people’s discretionary income; what they’re able to spend each year after they’ve paid their primary mortgage and taxes.

We break them down into three groups: The first, we call the Upper Middle Class, has $100,000 to $125,000 of this discretionary income; the Affluents have $125,000 to $249,000; the Super Affluents have $250,000 to $499,000; and the Truly Wealthy have more than $500,000.

Q: You contend that huge numbers of people in these categories, despite their wealth, think of themselves as “middle class.” Why is that? Are they deluding themselves?

A: A large number of them are newly wealthy. They made all their money themselves. In the Harrison Group research, 79 percent of them said they grew up middle class, and they still think of themselves that way.

This shows up in some interesting ways. In their own way, the new wealthy have a tight relationship with the dollar. It shows up in the family that’s very, very wealthy, and they may be staying in a luxury hotel, but they’re going to tell the kids, “Don’t touch the mini-bar, we can’t afford that.” They have, in their own way, a different knowledge base about overpaying for things.

Q: How does this translate into real estate?

A: They are absolutely looking at value. (My organization) had a buyer a couple of years ago who was looking at a multimillion-dollar property in Miami but insisted on seeing the place’s electric bills from the past two years. He wanted to know what it was going to cost him to light the place. You’re talking about a home where the property taxes could easily be $60,000 to $80,000 a year, and the electricity may be $500 a month. It’s almost irrelevant, but it’s a little bit like that person in the big hotel suite: taking the Diet Coke out of the mini-bar isn’t going to kill them, but the newly wealthy have that kind of a relationship with a dollar.

———-

Paul’s right, I guess you don’t get rich by drinking that $5 can of diet coke….

 

Paul Boomsma - Luxury Portfolio

John D’Ambrogio

That’s Rueters speaking, not me!

But that’s exactly what the respected news agency headquartered in NYC wrote this week.  The article - “Prudential to exit real estate brokerage business” says  that Canadian  Brookfield Residential Property Services has confirmed that it will acquire Prudential Financial Inc’s real estate brokerage as well as relocation services business for appoximately $110 million.

Brookfield Res. Chief Executive Graham Badun  ”We’re going to look to digest the acquisition and then look for some organic growth from that into new markets,”  according to the news service.

So what does that mean for Chicago relocation, and Chicago real estate in general?  Well, first of all, if transferees are in the process of being moved by what was once Pru Relo, it will now be handled by Brookfield’s relocation division.  As far as the brokerage brand, “FOR THE TIME BEING” it has been announced that the players will retain the Prudential name, although there is some confusion in the marketplace as to how long, under what terms, etc.  Particularly vexing is the problem of Pru offices carrying debt and how that will be factored in.

It was reported that Earl Lee will still lead the U.S. real estate piece, while Rick Schwartz, president of Brookfield Global Relocation Services, will head the  global relo services.  Prudential Financial’s (PRU.N) stock dropped 4.51% today.

There are a number of Chicagoland Prudential holdings, one of the largest being Prudential Starck in the NW suburbs, and Prudential Rubloff, which was acquired just two years ago by Michael Pierson and Chris Eigel.  Rubloff had been an independent boutique broker since 1930, and Starck had been a staple in the Chicagoland market for many years.  Chicago is home to many “tenured” real estate firms, including Koenig and Strey (now owned by HSA, but over 70 years old, and ironically, where the Prudential Rubloff owners originally started), and of course the veritable Baird & Warner, the nation’s oldest surviving real estate firm, established here in 1855.

So what does it mean?  Likely it means further consolidation of an already shrinking industry, and fewer players vying for today’s pie…

John D’Ambrogio

The Tribune’s own Mary Ellen Podmolik released some of the details of their revamped refi program – aimed at helping homeowners who actually PAY their mortgage but can’t refi because they are underwater – Sound familiar, Chicago area transferees of the last decade?

The Home Affordable Refinance Program has already escorted almost 900,000 Americans through the process, but the Obama administration wants more help.

All good news, right?  Well – Mortgage lenders are not MANDATED to participate, and you may or may not qualify, despite having an upside down mortgage?  Confusing?  Hmmmm…Below are experts from Mary Ellen’s excellent Q and A session -

QUESTION: Who might be eligible?

ANSWER: Borrowers whose loans are owned or guaranteed by Fannie Mae or http://www.freddiemac.com/ and with 20 percent or less equity in their homes.You can check on your mortgage, here –  www.freddiemac.com/mymortgage or http://wwww.fanniemae.com/loanlookup. Also, the loan had to have been guaranteed before May 31, 2009.

Q: When can applications be submitted, and when does the program end?

A: The program begins Dec. 1 and runs through Dec. 31, 2013.  Not all participating lenders, however, will be ready to take applications when the program begins.

Q: Can borrowers apply to any lender?

A: Yes – Kind of. Participation is voluntary for lenders, but one key component of the reworked program is designed to make lenders more comfortable with writing a new loan on an underwater property. Going forward, a HARP lender is not considered responsible if a loan it refinances goes bad because of mistakes in the original purchase loan. The change was considered critical to attracting lenders to the program and fostering competition among lenders for business. However, lenders still have underwriting guidelines to follow.

Q: What about missed mortgage payments?

A: A borrower can be 30 days late on one payment in months seven to 12 of the past year.

Q: What about maximum loan-to-value ratios?

A: For 30-year, fixed-rate loans, there is no maximum LTV ratio. For fixed-rate loans of more than 30 years and less than 40 years, the maximum LTV is 105 percent.

The maximum also is 105 percent for adjustable-rate loans with an initial fixed period of 5 years or more and terms up to 40 years.

Q: Can a borrower refinance from a 30-year to a shorter-term loan, even if it means increasing the monthly payments?

A: Yes. In fact, the government is encouraging that because interest rates are usually lower.  However, the borrower has to meet add’l criteria, like having a credit score of at least 620 and must have a debt-to-income ratio of no more than 45 percent.

Q: Can lenders solicit my business?

A: Um – Yep.

All in all, it’s certainly a move in the right direction – Especially a part about giving opportunities to those of us who have tried to play by the rules!

                          

harp to the rescue

John D’Ambrogio

What does billionaire, perhaps the most successful investor in history, have to say about the real estate market, and what does it mean to today’s transferees?  http://www.dailyfinance.com recently published some tips from the planet’s third richest guy!

1. The Basic Premise of Home Ownership — That Homes Increase In Value Over Time — Is Sound

Buffett believes  that “the housing bubble was inflated by an irrational, widespread belief that home prices would only ever go up — an extreme corruption of a generally valid premise. ”  This vision has been distorted, Buffet feels, by the misguided notion of “guaranteed appreciation.”

2. Buy Low (so you can sell high!)

Buffett made his life’s fortunes by buying companies at attractive prices with solid growth potential.  Not unlike the long term outlook for housing.   ”Home ownership makes sense for most Americans, particularly at today’s lower prices and bargain interest rates.”

3. Low Prices won’t wait forever (well, maybe for another year or two)

In a Op-Ed piece for the New York Times, Buffet declared that the real estate market  ”will move higher, perhaps substantially so, well before either sentiment or the economy turns up,” Buffett added : “If you wait for the robins, Spring will be over.”

4. The Smart Way to Own a Home Has Three Elements

The keys, according to Buffet, are:

FIXED MORTGAGE

AFFORDABLE PAYMENTS, and

LONG TERM PLAYS (which, obviously, can be hard for a mobile employee)

Buffet hardly has limited his investments to real estates.  For example, when explaining why his manufactured housing holding exceeded the pace of  the rest of the real estate market, Buffett pointed out that “[o]ur approach was simply to get a meaningful down-payment and gear fixed monthly payments to a sensible percentage of income. Sound advice – Don’t be greedy.

5. Don’t chase that “dream home”

No doc, interest only and other “exotic” loans got America (and the world) into a lot more debt that it had ever planned.  See #4 and be realistic!

As Mr. B. succinctly put – “Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.”

John D’Ambrogio

This informative piece just in from a trusted colleague – Elizabeth Soley, managing partner of  Jacob Street Partners.

“A recent article by USA Today* stated that one in seven drivers on the road in the US do not have auto insurance.  Even scarier, in 5 states, nearly one in four drivers did not have auto insurance despite being mandatory in every state except New Hampshire.  As a foreign national, what can you do to protect yourself in case of an auto accident?

Although it is not required, most insurance policies include coverage for uninsured/underinsured (UI/UIM) motor vehicle coverage but the coverage varies by policy.  UI/UIM coverage pays for the injuries to you and your passengers as well as the damage to your property from an accident where the other party is legally at fault but does not have insurance or enough insurance.

As you can see from the data in the USA Today article, it is critical to have ample coverage against uninsured motorists!Having UI/UMI coverage could pay the cost of medical bills, lost wages, repair of personal belongs and pain and suffering.  It is usually inexpensive to add UI/UIM coverage to your policy but just having some protection isn’t enough.   It is critical when selecting an auto policy to make sure that your policy has the maximum amount of uninsured/Underinsured motor vehicle coverage. ”

The cost for increasing your protection is minimal compared to the risk of not having the protection you need.  Thanks for the info, Elizabeth – As we know, you can be reached at 203-210-7257 or elizabeth.soley@jacobstreet.com .